$2$

$5$

$6$

$9$

$11$

$12$

$13$

$14$

$15$

$16$

$17$

$18$

$19$

$20$

$21$

$22$

$23$

$24$

$25$

$26$

K

D

E

F

B

Part D$\mathrm{.}1-$ Measurement Scenarios

$[15$ marks; approx. $23$ mins$]$

You are the Junior Controller of Palm Beach Limited $($PBL$)$ and your boss has asked for your input regarding the value of the following items $[1],[2],[3]$ & $[4]$ included in the year end financial statements.

The company follows IFRS.

$[1]$

PBL has a short$-$term investment in shares of a publicly traded company.

The shares are currently reflected on the Trial Balance

$175,000$

$($before any adjustments$)$

The shares current trading value on the TSX stock exchange is

REQUIRED:

$155,000$

$[3$ marks$]$

A$]$ Comment on the appropriate measurement basis for this short term investment. i$.$e$.$ how should this investment be measured on the Balance Sheet at year end?

$[$BI

Which level of the IFS $13$ fair value hierarchy would this asset be

categorized?

$[$C$]$ Prepare the adjustment $($if any$)$ that would be required at the year end date.

$[2)$

PBL is planning to issue bonds before year end to obtain additional financing for a planned upcoming expansion.

The bonds have a face value of

The bonds will be issued for the following period

$800,000$

$5$ years

The bonds carry interest annually at

$4\%$

Interest payments will be paid semi$-$annually

The market interest rate is

$6\%$

REQUIRED:

$[6$ marks$]$

$$Comment whether PBL will be issuing the bonds at a "premium" or a "discount".

$$Calculate the fair value of the bonds using the present value of the cash flows.

Summarize$/$SHOW all relevant inputs to support your computation.

$3)$ PBL owns a piece of production equipment that has outdated technology.

You believe the machinery may be impaired and would like to calculate the impairment loss, if any

The equipment will generate the following cash flows over the next three years:

$($expected cash flows are at the end of each year$)$

Year $1$

Year $2$

Year $3$

Assume that an appropriate discount rate is:

$30,000$

$20,000$

$10,000$

$5\%$

You plan to estimate the equipment's value in use as a first step.

The equipment's current carrying value, before any adjustment:

$60,000$

Assume the fair value less any costs of disposal is equal to estimated value in use.

REQUIRED:

$[4$ marks$]$

$$Calculate the estimated value in use for the equipment.

Summarize$/$SHOW all relevant inputs to support your computation.

$$Comment on the estimated value in use relative to the current carrying value.

What is the appropriate accounting measurement for the equipment?

$4)$ PBL signed a lease agreement to lease equipment for

At the end of the lease, ownership of the equipment reverts to the lessor.

Annual lease payments paid at the end of each year

The discount rate applicable to the lease is

REQUIRED:

$[$A$]$ Calculate the Present Value of future lease payments.

Summarize$/$SHOW all relevant inputs to support your computation.

$10$ years

$200,000$ per year

$6\%$

$[2$ marks$]$

G

$($n$)$

periods

$)$

$2\%$

$98039$

$96117$

$94232$

$92385$

$90583$

$6$

$000)$

$10$

$88797$

$\mathrm{.}87056$

$85349$

$83676$

$82035$

PV of Annuity

$($n$)$

periods

$1$

$5$

$6$

$21/2\%$

$97561$

$\mathrm{.}95181$

$\mathrm{.}92860$

$\mathrm{.}90595$

$\mathrm{.}88385$

$86230$

$\mathrm{.}84127$

$\mathrm{.}82075$

$\mathrm{.}80073$

$78120$

$3\%$

$\mathrm{.}97087$

$\mathrm{.}94260$

$91514$

$88849$

$\mathrm{.}86261$

$\mathrm{.}83748$

$\mathrm{.}81309$

$78941$

$\mathrm{.}76642$

$\mathrm{.}74409$

$2\%$

$98039$

$1\mathrm{.}94156$

$2\mathrm{.}88388$

$3\mathrm{.}80773$

$4\mathrm{.}71346$

$5\mathrm{.}60143$

$21/2\%$

$97561$

$1\mathrm{.}92742$

$2\mathrm{.}85602$

$3\mathrm{.}76197$

$4\mathrm{.}64583$

$5\mathrm{.}50813$

$3\%$

$\mathrm{.}97087$

$1\mathrm{.}91347$

$2\mathrm{.}82861$

$3\mathrm{.}71710$

$4\mathrm{.}57971$

$5\mathrm{.}41719$

K

$4\%$

$96154$

$-92456$

$\mathrm{.}88900$

$85480$

$82193$

$\mathrm{.}79031$

$\mathrm{.}75992$

$\mathrm{.}73069$

$\mathrm{.}70259$

$\text{'}\mathrm{.}67556$

$4\%$

$\mathrm{.}96154$

$1\mathrm{.}88609$

$2\mathrm{.}77509$

$3\mathrm{.}62990$

$4\mathrm{.}45182$

$5\mathrm{.}24214$

$-$

F$6$

F$7$

DII

F$8$

DD

F$9$

L

$5\%$

$\mathrm{.}95238$

$90703$

$\mathrm{.}86384$

$\mathrm{.}82270$

$\mathrm{.}78353$

$\mathrm{.}74622$

$71068$

$\mathrm{.}67684$

$\mathrm{.}64461$

$\mathrm{.}61391$

$6\%$

$\mathrm{.}94340$

$\mathrm{.}89000$

$\mathrm{.}83962$

$\mathrm{.}79209$

$\mathrm{.}74726$

$\mathrm{.}70496$

$\mathrm{.}66506$

$\mathrm{.}62741$

$\mathrm{.}59190$

$\mathrm{.}55839$

N

$0$

$8\%$

$492593$

$\mathrm{.}85734$

$\mathrm{.}79383$

$\mathrm{.}73503$

$\mathrm{.}68058$

$\mathrm{.}63017$

$\mathrm{.}58349$

$\mathrm{.}54027$

$\mathrm{.}50025$

$\mathrm{.}46319$

$5\%$

$\mathrm{.}95238$

$1\mathrm{.}85941$

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